Capital Goods: May 2012

States' (bragging) rights

A remarkable thing, commerce. Despite the best efforts of those paid to lure it to various states, it just won’t respect lines on a map. So it was when Peoria, Ill.-based Caterpillar Inc. announced in February that it would build a new plant and bring 1,400 jobs to Athens, Ga. The decision was trumpeted by Georgia officials as affirmation of their economic-development policies, quality of life, education system and so on.

Tar Heel officials, who had hoped the plant would land in the southeastern part of this state, had a number of excuses why that didn’t happen, ranging from the corporate tax rate to the need for a new, deepwater port. Amazingly enough, no one brought up incentives. In exchange for bringing the plant to Athens, state and local officials in Georgia agreed to provide tax breaks and other extras totaling $75 million. That includes land, water and sewer lines, roads and property-tax relief. But North Carolina was prepared to match that — the state Department of Commerce acknowledges it was considering offering a package valued at $70 million to $90 million.

Look at the map, and it appears that success in one state and failure in another may not have had much to do with what either did or didn’t do. At least nothing they did lately. Athens is roughly the same distance from Savannah, Ga., and Charleston, S.C., cities with deepwater ports. As a site-selection consultant told the Wilmington StarNews, that positions Caterpillar to play those ports against each other. As he didn’t explain, both — unlike North Carolina’s ports at Wilmington and Morehead City — are served by competing rail lines, which can also be pitted against each other to lower costs. Athens lies 30 miles from two interstate highways and about 70 miles from the transportation hub that is Atlanta.

Look at the map, and it appears that success in one state and failure in another may not have had much to do with what either did or didn’t do. At least nothing they did lately. Athens is roughly the same distance from Savannah, Ga., and Charleston, S.C., cities with deepwater ports. As a site-selection consultant told the Wilmington StarNews, that positions Caterpillar to play those ports against each other. As he didn’t explain, both — unlike North Carolina’s ports at Wilmington and Morehead City — are served by competing rail lines, which can also be pitted against each other to lower costs. Athens lies 30 miles from two interstate highways and about 70 miles from the transportation hub that is Atlanta.

The region around Atlanta extending north to Chattanooga, Tenn., is today what it was 150 years ago, when Grant and Sherman plotted to capture it: the gateway to the Deep South, Midwest or Atlantic coast, depending on which direction you’re heading. Geography and infrastructure built to take advantage of its location have attracted commerce from many states, not unlike the regional economies that have grown up around Charlotte, the Triangle and Triad.

You wouldn’t know that listening to politicians and those they tap to lead the state’s efforts in economic development. To them, industrial recruiting seems a zero-sum game. Win, and you claim all the glory for your state. Lose, and you watch confetti dancing through the air in another state. I suppose that mindset should come as no surprise given all the political finger-pointing that accompanies unemployment numbers.

The result is recruiting that is state-focused, even if the regional economies that are the primary lures for business have little regard for the political subdivisions called states. So you end up with some state or local officials, for example, concluding that the state’s economic future hinges on a new megaport with a $4 billion price tag. Who cares that, based on geography and infrastructure, a new port would have trouble competing and scant chance of ever catching up to the ones in Norfolk, Va., and Charleston? And who cares that the state’s existing ports lost money last year?

One of the more interesting ideas circulating in North Carolina economic-development circles recently has the state — rather than trying to compete against the port in Norfolk — building an interstate highway straight to it. In other words, if you can’t beat ’em, join ’em. Right now, most of North Carolina isn’t linked very well to that giant port just on the other side of the state’s northeastern corner. From the Piedmont, you just about can’t get there. The idea involves connecting Raleigh to Norfolk, either with a new stretch of interstate or by tying new stretches into existing highway.

The benefits seem obvious: Commerce would flow more freely between this state and southeastern Virginia; ancillary jobs associated with ports, such as in distribution centers, would move into the poor northeastern counties of North Carolina; and the state could enjoy some of the benefits of a deepwater cargo-container port without the expense of operating it. It’s also an idea that recognizes the regional nature of economies and the opportunity to create a regional connection.

There is a drawback, though: State officials couldn’t beat their chest and crow about a new port of their own. What they might do instead is begin to recognize that the businesses who use ports don’t really care whose state flag flies over them. When it comes to plant locales or the infrastructure that serves them, it’s what works best, regardless of lines on a map.

Scott Mooneyham is editor of The Insider, www.ncinsider.com. Email him at smooneyh@ncinsider.com.